Accountants Board Tin Ear Now Golden

Has the credibility of the new Public Company Accounting Oversight Board been destroyed before it's even up and running?

That's what some critics contend following an announcement last week that members set their own pay at $452,000 per year and the new chairman's salary at a whopping $556,000.

"This doesn't speak well to the ethics and integrity of its members when the first thing they want to do is pad their own pockets," said compensation expert Graef Crystal.

Ebbitt Grill Regulars

Although the board says the pay is necessary to attract the best talent, others note that $452,000 is more money than any other government employee receives, including the president of the United States.

The PCAOB is essentially an independent committee, of course, and will be funded through payments by accountants and public companies. But it was established by Congress as part of the Sarbanes-Oxley Act and has very broad powers, including the ability to enforce securities laws. The board, whose job will be to inspect audit firms, is seeking a one-month $1.9 million federal loan to cover initial expenses. "To me, this is smack in the middle of civil service," Crystal said.

To be sure, the level of compensation is still below what some accounting experts could command in the private sector, but Crystal said members of the civil service are always paid less -- and usually much less than $452,000 -- because of the prestige that comes with a government or quasi-government job.

Good benefits, great networking opportunities and so-called "deferred compensation" are all extremely alluring, he said. By deferred compensation, Crystal meant that government officials can command huge salaries upon leaving their posts "because their resumes are worth gold."

Afflict Thyself

Investors expressed outrage last year at some of the excessive payouts that executives had received while the stock market was tanking, and calls for linking compensation to operating performance have grown louder. So it seems odd that a new oversight committee would set such a high level of compensation for its own members before it has even accomplished anything.